Expensive projects drain funds as Mexico prepares to elect president

— Mexico is almost certain to elect its first female president in June — both leading candidates are women — but it’s almost equally as certain that she won’t have much room to act independently of outgoing President Andrés Manuel López Obrador.

The populist president has continued proposing new, expensive projects in the closing months of his administration, before he leaves office on Sept. 30. He will also leave a lot of big-ticket projects unfinished.

That will probably leave his successor with her hands tied for much of her six-year term. Even if opposition candidate Xóchitl Gálvez wins, a mountain of financial commitments will weigh on her. The candidate of López Obrador’s party, former Mexico City mayor Claudia Sheinbaum, leads in polls. A third male candidate from a small party has almost no chance of winning.

“The next administration will inherit a country with a financial hole that will limit the maneuvering room throughout the next term,” said Moody’s Analytics Director Alfredo Coutiño. “In order to deactivate the current fiscal vulnerability, the incoming administration will have to adjust fiscally (spending or taxes) in 2025.”

López Obrador has said that before he steps down, he’ll expropriate U.S.owned Vulcan Materials, a move which could cost the Mexican government as much as $1.9 billion if the Alabama-based quarry company wins an ongoing international arbitration complaint against Mexico.

Then there is a yet-to-be-fleshedout promise to bring passenger trains back to Mexico before he leaves office. On Nov. 20, López Obrador published a decree stating that if private freight operators refuse to run passenger service, the government would step in to do so.

While the trains would have to run on tracks run by the private concessionary operators — Mexico folded its money-losing state-run railroads in the late 1990s — the government would probably have to buy the trains, fix up stations and set up a ticket-selling scheme.

The money-losing ideas keep coming. On Dec. 26, López Obrador launched a state-owned airline at a time when most countries have decided to shut down or sell off their own. With guaranteed ultra-low ticket prices on flights to little-used, government-run airports, the prospects for hemorrhaging cash are endless.